The role of business insurance in protecting your business isn’t something most new business owners consider but it’s an important issue. Whether starting a business or wanting to grow one, the last thing on your mind is often what would happen if your business suffered an accident.
There are so many things to worry about and plan for as you get ready to start or grow your business that insurance might not seem pressing. However, when it comes down to it, the role of business insurance in protecting your business is huge. A single unavoidable accident can easily swamp your ability to recover, even once you have a more established business. So, it’s important for business owners to learn as much as they can about business insurance to ensure they have the coverage needed, with the right types of insurance to protect their investments. Here are a few mistakes you can make in choosing insurance that affect your business:
The role of business insurance
Different types of business insurance
There are many different types of business insurance available, but some similarities exist. They all have common elements, such as property, liability, and workers’ compensation insurance. Some other types of insurance that may apply to your business include:
- General liability insurance is basic coverage that protects you in the event of bodily injury, property damage, and advertising injury such as slander or libel caused by your business.
- Property insurance covers physical damage to your building and its contents (which includes equipment).
- Business interruption Insurance covers lost income if you must shut your business down for an extended period because of a covered loss like fire or flood.
- Cyber liability, which provides protection from third-party claims when a data breach occurs. It also covers extortion attempts and other threats that target your digital assets and information.
- Worker’s compensation ensures injured workers receive medical coverage and a portion of their wages while they are unable to work due to work-related injuries or illnesses.
- Keyman insurance covers you for losses when a key employee is unable to fulfill his/her role.
Not every business needs every type of insurance listed above. Laws require some types of insurance, such as worker’s comp, while some stakeholders require other insurance, such as lenders who require property insurance.
Getting the wrong type of insurance
One common mistake business owners make is getting the wrong type of insurance for their needs. For example, if you’re looking for general liability coverage, and your business has a lot of employees or operates in an area with high crime rates, you might want to consider commercial umbrella insurance instead. Getting the right insurance that covers all of your bases is important if you’re a small business owner. This includes business property coverage, commercial general liability coverage, worker’s compensation insurance, and more.
If you’re searching for specialist insurance coverage, you may want to go through a firm specializing in this type of insurance rather than your agent providing general business insurance. For example, if you’re interested in opening a dental practice, dental malpractice insurance can help ensure your business is covered for specific hazards you might face.
Thinking you don’t need insurance
Thinking you don’t need insurance is one of the most common and dangerous mistakes business owners make. If you’re not covered, and something unexpected happens to your business or property, you might lose everything you worked so hard to build. Insurance is there to protect you against events that aren’t part of your daily operations. It can also help protect against uncertain risks that may arise from changing technology or new laws. For example, If your office floods due to a burst pipe, you might face thousands of dollars (or much more) to replace or repair the damaged contents. Worse, a flood, which requires special insurance, can not only wipe out your business but means you lose the income you typically earn until repairs are finished.
Without the right insurance, you aren’t covered if you find yourself at the end of a liability case. For instance, if a customer slips on a spill on your floor and sues for damages. Even a small accident can threaten the business’s future.
Failing to read insurance policies carefully
Failing to read your insurance policy is a common mistake because you might not have the coverage you expect. Many people assume that an insurance policy covers all of their expenses, but some policies have exclusions to reduce the insurance company’s liability or may cover your damages at a level that leaves a huge gap if you want to replace damaged items. While it might seem tedious to read your insurance policy, it’s the only way that you know that you have the coverage you need for your business. If you aren’t familiar with your insurance policy, you may end up paying out-of-pocket for certain things that your insurance company doesn’t cover.
You should also read your insurance policy because it can help you understand what kind of coverage you have and how much it costs. Your insurance policy includes information about deductibles and copayments, so reading it allows you to know how much money you need to pay before the insurance company starts paying out benefits. It also contains information about how often payments are due to avoid an unexpected surprise when you encounter a covered event. Finding out your coverage lapse because you missed a payment isn’t a good thing when you count on your policy to cover losses.
Choosing insurance companies without researching them
One common mistake new business owners make is not doing research on insurance companies before choosing a policy. This is a huge mistake because having the right coverage can save you thousands or even millions of dollars if something goes wrong with your business or property. And, not all companies are the same. Some pay out promptly, some have less stellar records when it comes to covering your damages.
It’s also important to understand how much coverage you need and what types of coverage best suits your needs as an individual or company owner. Some types of insurance may not seem like they’re necessary at first glance but could end up being absolutely vital for protecting your assets from damages.
Not getting it in writing
Another common mistake is not getting everything in writing or believing that because something is discussed with your agent, it means something legally. This is definitely not the case, don’t let anyone tell you otherwise. You need to prove that you have the agreed coverage with your insurance company, so ensure that you always confirm everything in writing. If you don’t have any form of proof, then it is difficult for you to claim any compensation if something does go wrong. It’s also important to check the small print on your policy. You may think that you’re fully covered, but clauses in the small print or an addendum mean you can’t make a claim or full coverage isn’t included in your policy.
In addition, if you send any correspondence to your insurer, make sure it’s written in a formal tone and signed by someone who has authority over that business. You should also keep copies of any letters you send out—and keep them somewhere safe. In case there’s ever a dispute with your insurance company which seems likely, then having these letters will be crucial when trying to prove your case.
Not shopping around for insurance quotes
One of the most common mistakes business owners make when shopping around for insurance is not asking for a quote from multiple companies. This makes them feel like they’re doing a good job and husbanding their limited bandwidth, but in reality, it can cost them thousands of dollars in premiums. Shopping around is important because different companies offer different types of coverage and have different prices based on how much they think they need to pay out during a given year. If you don’t shop around, you may get the best price from one company and the worst coverage from another—which means that if something bad happens, you pay out more than you should have.
Not informing your insurance company about changes to your business
A common mistake that small business owners make is not informing their insurance company about changes to the business. If a business owner does not inform their insurance company about a change, then the insurance company may not cover them for any liability issues that arise from that change. But updating your insurance company helps the insurance company protect you from liability issues. It also helps to determine how much coverage you need. If they don’t have this information, it is difficult to get the coverage your business needs should you find yourself in need.
Conclusion
The bottom line is that your business needs insurance to protect you from any issues. While there are many types of insurance available, the most important thing is to get the right coverage for your business.
By taking time to shop around and compare quotes from different providers, you ensure that your business is covered against all eventualities – even those that might seem unlikely or unbelievable at first glance. It also helps protect your employees and ensure that your business isn’t caught with its pants down. So, do the research you need because this saves you time and money in the long run.
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